You’ve chosen the perfect brand to invest in, you’ve completed your due diligence and are well on your way to setting up a franchise. So, what next? Well, the first thing you should do is write your franchise business plan.
Many entrepreneurs believe that a business plan is not needed when buying a franchise, but this couldn’t be further from the truth.
Even though you’re investing in a tried and tested operating system and will have access to comprehensive training and support from an experienced franchisor, it’s still your business. The most successful franchises will have started with a plan to develop and grow; and the responsibility for your business plan lies with you.
Here are five reasons why all franchisees should consider the franchise business plan as a crucial part of their franchising journey.
1. Focus on what’s important
A business plan is a great way to ensure you focus on the key details of your franchise. As well as consideration being given to controllable factors, such as the operating model and growth strategy, it also compels you to think about external influencers.
Who are your competitors? How will the economic climate affect your franchise? Will developments in technology impact your business model? Contemplating how your business will evolve over time just as you’re setting up a franchise allows you to better prepare to run an effective and profitable business.
2. Identify challenges early
The process of writing a business plan makes you reflect on some fundamental questions about the challenges you may encounter whilst building your franchise. Giving these potential issues some consideration before you start your franchise is a good investment of your time and effort. Overcoming a problem that hasn’t been previously deliberated will be much more difficult than coming across a situation where you’ve already thought of the solution.
3. Have a better understanding of how your franchise will perform
The financial projections for your franchise will form the main part of your business plan. It will document how much investment is required to start and run your business; the cash flow. It will also include financial projections for the next three years with an indication of when the break-even point will be achieved.
Not only will it contain profit and loss forecasts and cash flow projections, it will also provide you with a good understanding of how your franchise will perform. This should enable you to confirm to your lenders how you are going to pay them back.
Setting up a franchise compared to starting an independent business means that you’re already at an advantage when it comes to the finances. You’re investing in a business that already has experience of trading, and so the financial element of the plan is based on actuals rather than estimates.
4. You’ll find it easier to secure funding
A franchise business plan has many benefits, but none more so than the role it plays when you approach your bank to secure funding. Banks will almost definitely request confirmation that you’ve fully reviewed the opportunity before they’ll support you to finance your franchise purchase.
Most banks regard franchises as less risky than independent businesses from a financial perspective, as there is a much better understanding of when the franchise will become profitable. Even if finance isn’t required at the beginning of your franchise journey, you may need funding to grow your business in the future.
And so, it’s important to remember, that your business plan is a constantly changing document and should be updated often. If you then decide to expand your business and need to approach your bank for money later, you’ll have all the necessary documentation to hand.
5. Enables you to recruit quality employees
A well-composed plan is also an effective way to attract talent. Recruiting employees with the right characteristics will improve your ability to retain consistency within your franchise; which is a crucial element of the most successful franchises.
Many employees will aspire to own a franchise themselves at some point in the future. Joining a business where they can learn the ropes and develop the skills required of a franchisee will be an appealing opportunity.
So, if your objective is to become amongst the most successful franchises; get planning. There are heaps of books, websites, templates and software to help you write your plan. And remember, there’s no one better to support you then your franchisor, so don’t be afraid to ask.